New Jersey Appellate Division Upholds Employer’s Right To Contract for Shorter Limitations Periods

On June 19, 2014, the New Jersey Superior Court Appellate Division, applying New Jersey law only, approved an employer’s ability to limit liability from allegedly aggrieved employees by allowing parties to contract for a shortened limitations period, in which an employee may bring claims against his or her employer. In Rodriguez v. Raymours Furniture Company, Inc., the employer, a retail furniture company, presented a prospective employee with an application for employment that included a provision with a shortened limitations period of six months to assert claims or lawsuits relating to the plaintiff’s service with the employer and waiving any statute of limitations to the contrary. The plaintiff was thereafter hired and worked for the employer for a three-year period. In October 2010, the plaintiff was laid off as a part of a companywide reduction in force. Nine months later, the plaintiff filed suit, alleging a violation of the New Jersey Law Against Discrimination (NJLAD). The trial court upheld the limitations provision in the application and dismissed the case as untimely, noting that the provision was clearly defined, was reasonable in its limitation and did not violate public policy.

The Appellate Division agreed with the trial court and recognized that while this agreement and waiver was fundamentally one-sided, it was not per se unenforceable. In sum, the court found:

A shortened limitation period is a negotiable issue;

The employee was not compelled to complete the employment application if he did not agree with the terms; and

The six-month limitations period was not adverse to the public interest.

As such, the agreement was enforceable.

However, the Appellate Division placed certain limitations on the enforceability of such agreements. For example, with respect to federal claims that require the exhaustion of administrative remedies through the EEOC, a six-month contractual limitation period may be found unenforceable because it would nullify a claimant’s ability to bring a claim. Conversely, where such administrative exhaustion requirements are not present, as is the case with NJLAD, a six-month contractual provision in employment contracts may be deemed reasonable and enforceable.

The Appellate Division further cautioned employers from burying a limitations provision within a voluminous set of documents. As a threshold matter, the court in Rodriguez permitted an analysis of the limitations provision because the provision “was contained in a two-page application and set forth very conspicuously in bold oversized print and capital lettering, just above the applicant's signature line. The terminology was clear and uncomplicated.” Thus, before implementing a limitations provision, employers should ensure that such language is clear, unambiguous and conspicuously placed within the agreement in order to be adjudged enforceable. The shortened limitations provision may ultimately only apply to claims under New Jersey law and not be enforceable with respect to federal claims so, in practice, its utility may only apply to smaller employers who are not subject to federal statutes.

Employers with questions relating to contractual provisions for a shortened limitations period in which an employee may bring claims against its employer should contact experienced employment counsel before making any determinations.